FPA Queens Road Small Cap Value Fund Institutional Class · NASDAQ:QRSIX
FPA Queens Road Small Cap Value Fund Institutional Class — FPA U.S. Value Fund — H1 2017 Earnings Presentation
19 slides from FPA Queens Road Small Cap Value Fund Institutional Class's earnings presentation, Jul 28, 2017
Slide 1: First Half 2017 Webcast Presentation
L C , L r s i so d v FPA U.S. ValueA i f i c Fund, Inc. (FPPFX) c First Half 2017 Webcast Presentation P a Presented by: t Gregory Nathan ir s F
Slide 2: FPA U.S. Value Fund, Inc. – First Half 2017 Summary
FPA U.S. Value Fund, Inc. – First Half 2017 Summary L C Summary: , L s ■ Continual lack of widespread value throughout the market r ■ However, there is a narrow set of healthy, yet out-of-favor industries providing good value to find companies in which to o invest s ‒ The Fund continues to concentra
Slide 3: Fund highlights
Fund highlights L C Investment objective , L s ■ The primary objective is long-term growth of capital. Current income is a secondary consideration Goal o r s ■ Generate returns in excess of the S&P 500 Index over full market cycles Investment philosophy vi d ■ Avoid permanent capital impairment ■ In
Slide 4: Portfolio Manager: Gregory R. Nathan
Portfolio Manager: Gregory R. Nathan L C Professional background , L s ■ 15 years investment experience r ■ Was most tenured senior analyst of FPA Contrarian Value o ■ Key contributor for FPA Contrarian Value s ■ Deep expertise: the skill and experience to identify quality companies selling for a di
Slide 5: Investment philosophy
Investment philosophy L C Seek to avoid permanent capital impairment , L s ■ An investment discipline on business quality, valuation and financial leverage r ■ Diversification by number of investments and industry exposure Invest in quality companies at attractive valuations i so v ■ Typically looki
Slide 6: Rules of engagement… healthy, growing industry is a must
C Rules of engagement… healthy, growing industry is a L must ■ Rule #1: Healthy industry with supply/demand balance helps ensure rational competition and pricing strength over time , L s ■ Rule #2: Companies must operate in secularly growing industries r ■ Rule #3: Identify the strongest players wit
Slide 7: Portfolio construction
Portfolio construction L C Broad market capitalization , L s ■ The Fund will generally invest in companies with market caps of $2 billion or more at time of initial purchase r ■ Allows us to invest wherever the best opportunities arise U.S. companies i so v ■ At least 80% of net assets will be inves
Slide 8: Idea generation
Idea generation L C , L Expertise uncovering a diverse set of s Discovery r opportunities Meetings ■ An unconstrained and continuous o ■ Management meetings search ■ Conferences s ■ Suppliers, customers, competitors, industry experts ‒ Multiple sources of ideas i ‒ Clear and rigorous criteria v Thir
Slide 9: Research and analysis
Research and analysis L C A comprehensive view of each business’s potential and value , L r s o 1. Financial Analysis 2. Operational Analysis 3. Valuation i s Deep analysis of 5+ years’ financials Discussions with management, Analysis to determine: v to understand: customers and suppliers to ■ Low/B
Slide 10: Investment process
Investment process L C , L r s i so v ~50 d 20-50 Overlay Build ~100 research A ~3,000 ~900 low/base/ ~250 Typically and analysis $2B+ Market Return on high cases; Forward P/E Forward to determine Cap Capital choose best c < 15x EPS Growth which Companies > 10% risk- i > 10% companies f adjusted mee
Slide 11: FPA's sell discipline
FPA’s sell discipline L C Reasons to sell , L r s ■ The market has recognized the company’s quality with a valuation re-rating such that estimated future returns from that o new price are projected to be below average i s ■ An investment thesis is proven wrong v ‒ Will not rationalize holding an inv
Slide 12: Sector breakdown as of June 30, 2017
Sector breakdown as of June 30, 2017 L C , L r s o Sector FPA U.S. Value Fund S&P 500 i s Consumer Discretionary* 36.1% 12.3% v Health Care 19.8% 14.5% Industrials 11.5% 10.3% d Information Technology 9.6% 22.3% Consumer Staples 5.5% 9.1% A Real Estate 4.3% 2.9% Financials c 3.8% 14.6% i Materials 1
Slide 13: Holdings as of June 30, 2017
Holdings as of June 30, 2017 L C Portfolio holdings highlights , L s ■ The Fund’s holdings operate within secularly growing industries r ■ In our view, the Fund’s holdings have strong competitive positions due to advantages stemming from having large o scale/low cost structure, superior products/ser
Slide 14: Portfolio characteristics as of June 30, 2017
Portfolio characteristics as of June 30, 2017 L C , L o FPA U.S. Value Fund rs S&P 500 i s 12-Month Forward P/E 14.6x 18.5x v Price/Book 3.0x 3.1x d Return on Equity 20.4% 17.7% EPS Growth Historical (2-year, $weighted median) 14.7% 5.3% A EPS Growth Forecast (2-year, median) 13.3% 11.4% c Debt/Equi
Slide 15: The importance of taking a long-term view
The importance of taking a long-term view L C Beginning 10 years ago, it took six years for an investment in Home Depot to begin to show material , L r s outperformance only to expand further over time. The key is to invest in: ■ Strong players with sustainable competitive advantages o ■ Healthy, se
Slide 16: Performance – net of fees
Performance – net of fees L C , L rs Trailing Performance (%) As of Date: 6/30/17 1 Year YTD QTD 10 Years* 5 Years* o FPA U.S. Value Fund, Inc. 12.02 7.59 1.98 6.35 11.61 s S&P 500 17.90 9.34 3.09 7.18 14.63 i US OE Large Blend 17.17 8.65 2.92 6.21 13.35 v Russell 2500 19.84 5.97 2.13 7.42 14.04 Ad
Slide 17: Appendix
L C , L r s i so d v c A i Appendix c i f P a r s t F i 17
Slide 18: Important Disclosures
Important Disclosures L C These slides are intended as supplemental material to the First Half 2017 FPA U.S. Value Fund audio presentation that is posted on our website fpafunds.com. , L r s It is important to understand that the views expressed on these slides and in the accompanying audio presenta
Slide 19: Important Disclosures – cont'd
Important Disclosures – cont’d L C Index/Category Definitions , L s The Standard & Poor's 500 Stock Index (S&P 500) is a capitalization-weighted index which covers industrial, utility, transportation and financial service companies, and represents r approximately 75% of the New York Stock Exchange (